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Cable Companies Should Be Nervous About Dish

Dish Network is reportedly readying a web TV service that will do what Netflix, Hulu and Amazon do not -- offer live, local programming in addition to 10 of the "highest rated cable networks" over the Internet.

Cable companies should be nervous.

According to a report in Bloomberg, Dish is looking to charge between $20-$30 a month for the service and target a younger, 18-to-34 year-old demographic that mostly watches TV on their smartphones and tablets. But mobile access shouldn't scare cable companies -- they've been fitfully implementing their own "TV Everywhere" solutions over the past three years.

The price, on the other hand, should.

According to the latest figures from the Federal Communications Commission (FCC), cable companies charge an average of $20 for a basic package that is essentially the same lineup of local and public broadcasts that you would get for free if you slapped an antenna on your roof. Throw in equipment rental fees ($6.28 on average), taxes and other nebulous fees and you're looking at a bill that's close to $30 with none of the cable networks that Dish is supposedly lining up for its service.

To get to that next programming tier, where you'll find CNN, ESPN, etc. (what the FCC dubs "expanded basic") you'll pay an avergae of $61.63 before equipment rentals, taxes and fees. That's a huge jump and one that Dish is looking to exploit to its advantage.

It will have other advantages too.

Since Dish's service is likely to be simply an app that can be accessed on retail devices like the Roku or Xbox One, there will be no equipment rental fees or other sneaky charges to run up the bill. While the Dish programming lineup is unlikely to be as generous as cable's $60 expanded basic package, it will have far more valuable content than the basic package cable companies charge $30 for -- including ESPN and the Disney Channel. Throw in $8 a month for Netflix and you're looking at a very compelling value for consumers who may have been reluctant to cut the cord and lose access to sports and live programming.

That last piece is critical, because despite the influx of streaming video-on-demand services, live broadcast TV remains absolutely essential for most American TV viewers. According to IHS, broadcast TV accounts for 82 percent of our viewing time today and will still claim about 76.5 percent of our viewing time in 2017, even as non-linear alternatives gain ground.

But if Dish is going to capitalize, it will have to move fast. Cable companies are showing that they are increasingly aware of this pricing vulnerability. Last year, both Time Warner Cable and Comcast rolled out lower-cost TV/broadband bundles that included the coveted HBO at sub $40 price points.